* The federal deficit is shrinking faster than expected due to surging tax revenue and bailout paybacks, altering the budget debate.

* During his visit to Russia last year, deceased Boston bombing suspect Tamerlan Tsarnaev was coolly received by the Dagestan region's Islamists, who found him to be brash.

* The Yen's decline signals hopes for a more groundbreaking economic shift: the reversal of nearly two decades of stagnation, weak demand and declining prices.

* A multibillion-dollar settlement of a federal investigation into Johnson & Johnson's sales practices is on hold, as J&J seeks to avoid wording in the agreement that could leave it vulnerable to private lawsuits.

* Futures regulators are close to an agreement that would end a months-long standoff over a central plank of the 2010 Dodd-Frank law and finally bring more transparency to the trading of swaps, the complex financial contracts at the heart of the financial crisis.

FT

A report by Kofi Annan's Africa Progress Panel to be published on Friday criticises mining deals made by Eurasian Natural Resources Corp for "opaque concession trading" costing the Democratic Republic of Congo $750 million.

The Financial Reporting Council, the UK's accounting watchdog, has launched two separate investigations into auditing firm KPMG - one relating to its audit of car dealer Pendragon and the other probing into a KPMG member's shareholding in a client company.

British Prime Minister David Cameron took on critics in his party who demand Britain's immediate exit from the European Union, reassuring international investors that the country's future lay within the EU.

An influential committee of MPs recommended a third or possibly even a fourth runway at London's Heathrow airport on Friday, boosting its controversial efforts to expand.

Chief Executive Stephen Hester is convinced that Royal Bank of Scotland is entering its last phase of repair ahead of reprivatisation, even after its poor first-quarter results last week.

NYT

* The Bank of Japan's efforts to reinvigorate the nation's economy are showing results, at least in the sinking value of the yen.

* Regulators outlined a proposal that could make Internet service on airplanes cheaper, at speeds up to 30 times faster than the service many people have in their homes.

* Mail Online, The Daily Mail's site, has expanded on the news and business sides with offices in New York, and coverage of celebrities in Los Angeles.

* According to Delta Air Lines executives, the carrier's bright and spacious new terminal at Kennedy Airport in New York reflects the industry's new priorities. As financial health improves, airlines are trying to lure passengers with better amenities and service instead of the lowest fares.

* Merck and GlaxoSmithKline will charge less than $5 a dose to expand protection from the virus known as HPV to millions of girls in the poorest countries.

Canada

THE GLOBE AND MAIL

* Conservative backbenchers are pushing to reopen the abortion debate, despite public assurances by Prime Minister Stephen Harper that the issue is settled.

* Nova Scotia's economic and rural development minister Percy Paris resigned from cabinet late Thursday night after he says he lost his composure during an incident at the provincial legislature involving an Opposition member.

Reports in the business section:

* Mark Jaccard, one of Canada's top environmental economists, has a stark warning for the country's oil sands producers: find ways to dramatically cut carbon emissions or risk becoming the buggy-whip producers of the 21st century.

NATIONAL POST

* Juan Ramon Fernandez, described by police in Canada as "a perfect gangster", died the perfect Hollywood gangster death - ambushed by mob rivals, dying in a hail of bullets and his body burned in a field in the picturesque countryside outside Palermo, the historic capital city of Sicily.

* The steel trusses of a new multimillion dollar sawmill formed the backdrop for Liberal Leader Christy Clark as she touted her government's forests strategy during a campaign whistlestop Thursday in Burns Lake, where little more than a year ago an explosion and fire at the previous mill devastated the community.

FINANCIAL POST

* Mobilicity is officially on the block and Telus Corp's chief executive Darren Entwistle would consider buying what he calls a "nice to have" asset, depending on feedback from the government.

- The Ministry of Commerce is planning to assist manufacturers to identify "specific regions" in key emerging export markets, particularly in India and other BRICS nations, to replace lost business in the eurozone and the United States.

- Total overdue loans for China's top 10 listed banks rose to 486.5 billion yuan ($79.3 billion) by the end of last year, up 29 percent from 2011, according to a report released by PwC.

- Beijing-based iResearch Consulting Group said Chinese shoppers spent 352 billion yuan ($57.4 billion) online in the first quarter of the year, a drop of 17.1 percent compared to the previous quarter. However, annual turnover should still reach 1.85 trillion yuan, the company said.

- Three people were killed and six injured in a landslide on Thursday near a village in Lushan county, Sichuan province. The landslide also blocked the road from Lushan county to Baoxing county in Ya'an city.

PEOPLE'S DAILY

- Chinese President Xi Jinping met visiting Israeli Prime Minister Benjamin Netanyahu on Thursday and pledged to make more efforts towards peace in the Middle East.

Corporate Finance

* Activist investor Carl Icahn and Southeastern Asset Management Inc, two of Dell Inc's largest shareholders, have proposed an alternative to a $24.4 billion buyout deal led by founder Michael Dell, the Wall Street Journal reported.

* China's $482 billion sovereign wealth fund China Investment Corp is set to appoint a vice mayor of Shanghai as its new chairman, three sources with knowledge of the deal told Reuters.

* Banks have been approached about a potential syndicated loan to back the privatisation of Royal Mail Group, banking sources said on Thursday.

* Royal Dutch Shell and India's Oil and Natural Gas Corp are exploring the possibility of a strategic tie-up to jointly bid for global oil and gas assets, the Economic Times reported.

* Bankers are looking towards the U.S. debt market to raise 900 million euros ($1.18 billion) for a buyout of industrial ceramics firm CeramTec, spurning Europe where risky debt is in shorter supply, bankers said on Thursday.

* French insurer Scor has emerged as the lead bidder for Generali's U.S. life reinsurance business in a deal that could be announced shortly, two people familiar with the matter said.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

American Water (AWK) upgraded to Buy from Neutral at CitigroupArkansas Best (ABFS) upgraded to Buy from Neutral at CitigroupBoston Scientific (BSX) upgraded to Outperform from Market Perform at Wells FargoEdison International (EIX) upgraded to Buy from Neutral at CitigroupGranite Construction (GVA) upgraded to Neutral from Sell at Goldman

Downgrades

AES Corp. (AES) downgraded to Neutral from Buy at UBSAtlas Energy (ATLS) downgraded to Neutral from Outperform at RW BairdCablevision (CVC) downgraded to Neutral from Buy at CitigroupDean Foods (DF) downgraded to Equal Weight from Overweight at StephensDendreon (DNDN) downgraded to Sell from Neutral at CitigroupGrand Canyon (LOPE) downgraded to Neutral from Outperform at RW BairdLHC Group (LHCG) downgraded to Hold from Buy at Deutsche BankOptimer (OPTR) downgraded to Neutral from Outperform at RW BairdPinnacle West (PNW) downgraded to Sell from Neutral at CitigroupRent-A-Center (RCII) downgraded to Hold from Buy at CanaccordSalix (SLXP) downgraded to Neutral from Buy at Janney CapitalShire (SHPG) downgraded to Neutral from Overweight at JPMorgan

Initiations

3D Systems (DDD) initiated with a Buy at Janney CapitalActavis (ACT) initiated with an Outperform at BMO CapitalAllergan (AGN) initiated with an Outperform at BMO CapitalEmeritus (ESC) initiated with an Outperform at Wells FargoEnsign Group (ENSG) initiated with a Market Perform at Wells FargoForest Labs (FRX) initiated with an Underperform at BMO CapitalJ2 Global (JCOM) initiated with an Outperform at WedbushMylan (MYL) initiated with an Underperform at BMO CapitalSplunk (SPLK) initiated with a Market Perform at FBR CapitalTeva (TEVA) initiated with an Outperform at BMO CapitalWorkday (WDAY) initiated with an Outperform at Oppenheimer

Small investors are borrowing against their portfolios at a rapid rate, reaching levels of debt not seen since the financial crisis. The trend, driven by rising stock values and low interest rates, is sparking a growing debate among market watchers, the Wall Street Journal reports

Disney’s (DIS) cable sports channel ESPN has had discussions with at least one major U.S. carrier to subsidize wireless connectivity on behalf of its smartphone users, sources say. Under one potential scenario, the company would pay a carrier to guarantee that people viewing ESPN mobile content wouldn't have that usage counted toward their monthly data caps, the Wall Street Journal reports

Dish Network (DISH) lined up Jefferies Group to help it finance its $25.5B bid for Sprint Nextel (S) as it tries to convince the company its offer is better than Softbank’s (SFTBF), sources say, Bloomberg reports

Toyota’s (TM) years of fighting the yen is over, at least for now. The weakening yen breached 100 against the dollar in U.S. trading yesterday, opening the way for Japan to emerge from an unprecedented and largely uninterrupted five-year stretch where the currency’s appreciation beyond that level roiled exporters and their ability to sell cars and other products abroad, Bloomberg reports

$1.8 billion per LCS ship is insane - it should be binned, the US navy already has a large fleet of enormously capable multirole combat ships that can operate over ANY littoral already and can put every other navy to shame, fast, and everyone knows it. This is unnecessary duplication.

Most of this ludicrous acquisition is driven by and a product of the alleged 'need' for a boost-phase missile defense 1st tier, and the necessary doctrine of excessive forward deployments necessary for that boost phase intercept profile.

That forward positioning on the littoral keeps getting in the face of other states, and THAT is what is escalating tensions with other countries.

That tension is the ONLY reason why such a galactic-sized multifaceted waste and misallocation of resources is occurring, and is being 'justified'.

The US Navy is out of control with this warped sort of stuff, and so are the company's and politicians driving it, and thus US foreign policy and defense policy is running off the cliff, and is becoming a threat to the peace of the world.

The general assertion that this forwards in-your-face deployment stuff responds to threats and decreases them, is a fucking flat-out lie, a complete distortion of reality, it does the reverse, it intensifies international tensions and animosity, and ratchets-up arms purchases and all the related activities. It is fundamentally a disingenuous proposition put about by lobbyists and advertisements for large defense corporations and militates against security of the citizen.

Construction costs have doubled to $440 million per ship from an original goal of $220 million.

The Navy has a large fleet of aging ships, and the smaller ones are at retirement age. The LCS designs are horribly flawed (the Freedom class is particularly bad), but that doesn't change the need for mothballing or scrapping the older ones (many of the frigates can't be upgraded for reasonable costs). You'd think the Navy could try cooperating with the Dutch and building off their Holland-class patrol boat, which is slower but better-armed, helicopter-capable, and a quarter of the price of an LCS.

But, then, this program isn't actually about building decent ships. It's about keeping shipyards open. That's the only possible reason for a two-design, two-contractor program operating at multiple shipyards. This is welfare for the MIC, pure and simple—keep them open so that there are available shipyards if/when WW3 breaks out, just in case WW3 somehow manages to involve WW2-style naval combat.

But the program cost is $37 billion, split between 48 hulls, or averages to $770 million per hull, which is $330 million more than the $440 million being claimed, from an original budgeted $220 million per hull.

But the operating life costs will be at least $1.8 billion per ship.

But if this were understood the first 20 hulls would not have been contracted at all, and then we find they are unable to survive in a high air and missile threat environ, inshore of effective destroyer SM2 coverage.

One of the shipyards is Australian btw, Austral, but nice of you guys to be so considerate.

The point I made above though is that this sort of in-your-face deployment of LCS ships, is more likely to start WWIII, not be its avoidance, or reply. It's a circular and disingenuous argument for their existence and budget, as their role is highly objectionable, offensive of good relations, and destabilizing in nature.

Though I agree, the US needs a practical replacement for aging Perry frigates etc, but why this? They went for the LCS paradigm because they could no longer justify the blue-water frigate fleet, for CVN escort groups. And the whole navy is moving into the in-your-face SM3 approach to ballistic missiles, which is high-risk, and it also requires much forward-basing on periphery lands and ports also. Hence much aggressive actions are continually required to bolster and secure these, raising tensions and distrust further (while ramping other operational costs, such as drones, C4i, spec-ops etc)

It's a waste, and actualy undermines US and Allied security, and ramps resistance to pax-americana and strategic policy, for a low probability of pay-off as a 'defense shield' paradigm, that in truth is very unlikely to work effectively, if push really comes to shove. Which it could, if in-your-face deployment of naval units continues, and continues to expand.